Managing your financial situation following a divorce can be difficult. An already stressful time is often made even worse by tight budgets and being required to reach agreements on a number of different financial matters.
The process is tricky enough in an amicable split, but it can get even harder if there are ongoing disagreements or disputes which aren’t resolved. That’s why we’re here to guide you through the process, giving our best expert advice on how to deal with each and every financial problem you might be faced with during a divorce.
Assessing finances post-divorce
Post-divorce, you need to assess the financial situation you are in and potentially re-adjust your budget accordingly. Depending on who earned more in the marriage, you might find that you’ve been provided with spousal maintenance (more information below) to help with the transition to independence.
Adversely, you might have had to pay spousal support to your former partner, and you’re now looking to adjust your budget to make up for that.
Here are a few helpful things to consider when adjusting finances post-divorce:
- Income vs expenses
- Determine debts, loans, credit cards
- Consider shared accounts with your ex-partner
- Track new outgoings such as spousal maintenance and child support
- Cost of ongoing legal procedures
- Develop a new plan
Understanding spousal maintenance
Sometimes referred to as alimony, spousal maintenance is a form of financial settlement following a divorce, in which the financially stronger spouse makes a payment to the other to help manage financial needs during the divorce.
The goal of spousal maintenance is to help the financially weaker side of a divorce adjust to independence comfortably, without risking falling into serious financial trouble. Sometimes, this settlement is agreed upon amicably, but in less amicable situations, this has to be ordered by the court to help with living costs.
Spousal maintenance can be settled as a one time payment (lump sum), paid over a fixed period, or in some cases until a party is remarried or dies.
Understanding child maintenance
Following a divorce, child maintenance is designed to ensure that a child’s everyday needs are taken care of. These needs can include:
- Clothes
- Food
- Housing
- Education
- Healthcare
Children are our future, and even in divorces with high levels of conflict, we understand that it’s vital to ensure that any children involved are protected and taken care of as well as possible.
In most cases, we’d recommend that you try to reach an amicable solution to child maintenance arrangements with your former partner. However, if this is not possible, you’ll need to contact child maintenance services (CMS), who will determine the amount of support that needs to be paid, and who by.
For more information regarding the details of child support during divorce, check out our dedicated blog ‘Children and Divorce: What Happens’.
Asset management post-divorce
Assets aren’t always split 50/50 during a divorce. Matrimonial assets such as homes, properties, pensions, investments and savings are considered following a divorce. Assets can, in some cases, be split down the middle, assuming both parties are financially secure and there are no other factors involved.
However, more often than not, factors such as financial imbalance, childcare or a multitude of other things will prompt courts to make a different decision (assuming you cannot come to an agreement with your ex-partner).
Find out more about how assets are divided in a divorce.
Credit management after a divorce
Credit management after a divorce refers to how you manage the split from your ex-spouse financially. This might include:
- Closing joint accounts – If you have joint accounts, you’ll need to contact your bank to close these accounts or transfer them to an individual account.
- Removal from/correction of credit reports – You need to make sure that credit reports are amended so that your former spouse is not named on them any more.
- Building credit – If you’ve taken loans or made big payments during the divorce which has affected your credit report, consider starting slowly to rebuild credit.
- Managing debt – If you’re in any debt or owe any money as a result of divorce proceedings, plan how you’re going to pay this money back. Prioritise high interest debts first.
What is a notice of disassociation?
A notice of disassociation is a request to credit agencies to remove any and all financial links between two individuals. This is important following a divorce because you and your former partner will no longer be making payments from joint accounts, or sharing money outside of agreements from the divorce.
This is an important step to take so that the actions of the other party do not affect your credit rating without you knowing. You’ll normally need to provide specific details about former financial agreements which are no longer in place.
Dividing pensions and finances after a divorce
Like with most divorce-related agreements, the division of pensions and finances is primarily down to the couple. If you can agree on a fair split of your finances, this is likely to make the process much quicker and easier.
However, this is not always the case, sometimes you’ll need to ask the court how pensions and finances need to be split. Then, it’s likely that the court will issue a pension sharing order (PSO) to legally specify a split as a percentage of the pension’s value or as a specific amount.
Alternatively, you can opt for ‘pension offsetting,’ which includes one party keeping all or most of the pension, whilst the other receives a larger share of other assets.
How to deal with a divorce financial settlement
Dealing with a divorce financial settlement is tricky, but not impossible. You can choose to manage financial proceedings on your own, or with expert divorce solicitors such as our team at VM Family Law.
Financial divorce settlements are often surrounded by legal jargon and hidden costs which only add to the stress of the situation. Here at VM Family Law, we work closely with our clients to ensure divorce financial settlements are carried out as smoothly as possible, helping with all aspects of the process including court proceedings.